Prepaid cards can be a good choice - if you choose wisely

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SEATTLE -- Prepaid debit cards are the hot financial product right now. American consumers are expected to load $200 billion on these cards this year -- a 600 percent increase from 2010.

But are these cards a good deal? Prepaid debit cards are billed as a better way to manage your money; a smart alternative to checking accounts. With a prepaid card, there's no credit check and no minimum balance required. And since you typically can't spend more than you load on the card, there are no overdraft penalty fees.

But almost all of these cards have fees that can really add up. Bankrate.com just released a survey of two-dozen widely issued pre-paid cards.

"Of the 24 cards we surveyed, they all seemed to have a fee or one kind or another," said Greg McBride with Bankrate.com. "Very often these can be for ancillary-type charges, the things that can add up quickly. So, it's very important for consumers to shop around because there is a wide variation in the fees that are being charged and the amount of those fees."

Most prepaid cards have a monthly service fee ranging from $3 to $9.95. Some have an activation fee of as much as $15.

There can also be an inactivity fee, a declined transaction fee and a $2 charge to contact customer service. The good news is: a lot of these fees can be avoided and that's why it's so important to figure out how you'll use the card before you get one.

"There's not a one-size fits all answer here," McBride said. "It's really important to shop around and in particular, calibrate how you intend to use the card with the various fee structures."

McBride says a lot of banks now offer prepaid debit cards that let you use their ATMs for free withdrawals and their branch offices to load money onto the card for free.

One more thing to consider: Is that prepaid card insured? Most of them are covered by FDIC insurance, but not all. It's up to the card provider to decide whether to offer it.

Keep in mind: You cannot receive federal benefits, such as Social Security, on a prepaid card that does not have FDIC insurance.